Review of measures of pensioner poverty
Review of measures of pensioner poverty
Economic and Social Research Council (ESRC) and the Department of Work and Pensions (DWP)
July 2007 - January 2008
PI: Dr Debora Price
Grant ref:[/B] RES-173-27-0038
This report is a critical review of the literature relating to the measurement of poverty of older people in the UK. It was the product of a six month funded Fellowship between June 2007 and January 2008 to consider evidence of how well different existing poverty measures capture pensioner poverty, alternative methods for the measurement of pensioner poverty, and to identify knowledge gaps in the measurement of pensioner poverty.
About the research:
Poverty is commonly understood as material and social deprivation due to lack of financial resources. To measure it, we need to define and agree on needs, measure the extent of deprivation, and agree that lack of financial resources (which must also be measured) is the cause of the deprivation. The measurement of poverty is contested and complex and no measure captures all of these elements. For older people a number of issues arise with each type of measure, and these are explored in this report. Some problems are common to all or many measures. In particular frailty, illness and disability are virtually ignored in the measurement of poverty, despite the increased needs and changed patterns of consumption that accompany transitions into poorer health. Also ignored are those living in institutions. In many measures, the treatment of assets and wealth, of increasing importance to older people, is theoretically unclear and requires development. Further research is needed in each of these areas if we are to measure, understand and design policy to combat the poverty of older people.
Research gaps were also identified in a number of areas, including equivalence scales for older people, money sharing among older couples, how to measure material deprivation in older people, and the apparent ‘under-consumption’ of resources by some older people. In general, we know very little about how wider resources interact to ameliorate poverty (especially kin support and financial resources). The relative merits of measuring income, assets and consumption in understanding the resources available to older people and their well-being is also an area needing further research, as is understanding the dynamics and the development of indicators of the social exclusion of older people.
Since no measure can capture all elements of poverty at once, a basket of measures is highly desirable when tracking ‘poverty’. The selection of the basket should be such that each of the important elements in the measurement of poverty is at least represented –
(i) needs/deprivation, (ii) financial resources, and (iii) the link between low financial resources and deprivation.
Official measures which focus on relative low income have widespread support and are particularly important for tracking inequality, trends over time and for European and international comparisons. However they also attract substantive critiques. Current ‘poverty’ measures of relative low income do not capture needs or deprivation, and income can be a problematic measure of financial resources. Deprivation is directly observed through material deprivation measures or through consumption measures. Consumption measures are also widely considered to capture financial resources in better ways than income measures. However both material deprivation and consumption measures would require substantial methodological development to be satisfactory for older people. Relying on low income measures alone is insufficient to be considered an ‘accurate’ measure of poverty, although many argue that in the context of a low income measure, the use of a budget standard would have more empirical and scientific validity than a relative line.
These different possibilities for measuring the poverty of older people are critically considered in detail in this report.
A PDF version of the full report can be downloaded here.